The UK's Office of Fair Trading has called on the European Commission's competition authorities to refer parts of the proposed Arla Foods/Express Dairies merger back to London for approval.
Express Dairies announced back in March that it was to merge with the UK arm of Scandinavian dairy group Arla Foods, a move which would create the biggest supplier of butter, spreads and margarine to the UK retail trade.
Since the merger involves companies from two separate EU Member States, it is the Commission which has the right to rule on whether the merger will go ahead. But the UK authorities are concerned that since the new company will operate effectively in the UK alone, they should also have a say in whether the deal be allowed to go through.
Under Article 9 of the EC Merger Regulation, a Member State may inform the European Commission that a merger threatens to create or strengthen a dominant position as a result of which effective competition will be significantly impeded on a market within that Member State.
John Vickers, OFT chairman, said: "The proposed transaction raises possible competition concerns within the UK in relation to the procurement of raw milk, the supply of fresh processed milk and the supply of fresh potted cream.
"Those concerns are best examined in the UK, so we have asked the European Commission to refer the relevant parts of the transaction for consideration here."
It is not certain that the Commission will agree with the UK's assessment of the merger, and even if it does, it is not obliged to refer the case back to the OFT: it can instead deal with the case itself while assuring that the UK's concerns are addressed. However, the likelihood is that it will refer the case back to the UK authorities.
Meanwhile, Arla Foods has also announced the acquisition of another company, this time closer to home. As of 15 June, Arla Foods will acquire 100 per cent of the import company Delimo, which is partly owned by its director Ib Mortensen and partly by Arla.
Delimo imports speciality cheese from the whole of Europe, particularly from Italy and France, for the Danish retail sector. Arla Foods has held shares in the company since 1988. The purchase price has not been disclosed.
Arla Foods director Povl Krogsgaard said that the purchase was based on Arla Foods' knowledge and experience of the dairy sector.
"We're skilled at marketing, selling and distributing dairy products. At a time when cross-border trade is strongly increasing, also with regard to cheese imports, it is only natural that we involve ourselves in this area."
Mortensen agreed: "Arla Foods' acquisition will strengthen and enhance Delimo's potential not just in Denmark, but in the whole of the Nordic area."
Last November, Arla Foods purchased the British cheese wholesaler H.T. Webb, which also imports speciality cheese to the UK market. Mortensen has been appointed managing director of H.T. Webb in the UK with effect from 15 June.
"Overall, we will be able to create further synergies for the two companies," said Krogsgaard.
Arla Foods' acquisitive strategy of the last few years is still causing job cuts. The company announced last week that it is planning to cut 600 jobs over the next three financial years, largely within its administrative departments.